Nelson Peltz Is Still Scaring Companies

Mark Fetting, chief executive officer of Legg Mason, was out of time. His biggest investor, Nelson Peltz, had watched for three years as Fetting struggled to increase profit at the Baltimore-based money manager—home to onetime star manager Bill Miller—and halt $135 billion in fund redemptions. At Peltz’s behest, Fetting cut costs by as much as $150 million a year and bought back at least $1 billion in stock. Still, Legg Mason shares hadn’t gained much since Peltz’s hedge fund bought its stake in mid-2009. With a standstill agreement set to end in November, allowing Peltz to raise his holdings from 11 percent or propose a slate of directors, Fetting quit on Sept. 11. “Patience was clearly running out,” says Jeff Hopson, an analyst at Stifel Nicolaus. “The odds of a dramatic corporate change have increased at Legg Mason.”

Thirty-five years after doing his first acquisition, Peltz, 70, is still shaking up boardrooms. A billionaire and father of 10 children ranging in age from 9 to 49, Peltz made his first fortune in the 1980s, doing leveraged buyouts financed by high-yield bonds sold by Michael Milken of Drexel Burnham Lambert. He is one of the last corporate raiders of that era still active, though he now takes minority stakes in companies and does not use borrowed money. Milken client T. Boone Pickens mostly trades oil and energy stocks these days. Saul Steinberg is out of the game. Another Milken client, Carl Icahn, returned his outside investors’ money in early 2011.